I haven’t traditionally followed the FTSE-100, having found plenty of ways to lose money in markets closer to home over the years.

But, at the urging of several members who have promised to go easy on me as I get up to speed, I’ve been taking a crack at it.  I trade and chart on Think or Swim, and unfortunately they don’t quote the index itself.  But, they do quote the UKX, which is 1/10th the value of the index.  So, it tracks just fine and it’s easy to do the math.

The FTSE represents about 80% of the UK market and is cap-weighted.  As of March 2012, the top ten comprised about 50% of the $1.5 trillion whole:  Royal Dutch Shell A/B, HSBC Hldgs, Vodafone Group, BP, GlaxoSmithKline, Rio Tinto, British American Tobacco, BG Group, Diageo and SABMiller.

Over the past five years, UKX has formed a triangle of sorts.  Its price pattern greatly resembles SPX’s, completing a .786 retracement of the 2007-2009 decline in early 2011.  Unlike SPX, however, it hasn’t topped its Feb 2011 high of 609.58.  It came close in May (608.94) and July (608.41), then did the same swan dive as the rest of the markets in July – October — eventually falling 20% before retracing all but 11 points by March 2012.

During the course of its recovery, UKX has done a nice job of following fairly well-defined channels and fan lines.  A close up reveals sort of a coiling behavior, as prices have made progressively higher lows and lower highs.

continued…

Since it bottomed on June 1, UKX’s price and RSI have risen through the same kind of channels as SPX.  Also like SPX, it has cleared some important hurdles and has the potential to reach its .786 and/or .886 by OPEX on July 20.

But, there’s a bearish view that makes just as much sense.   If we view the last decline as a megaphone (descending expanding wedge) instead of a channel, UKX appears to have run out of steam at its recent high of 562.39 (June 20.)

But, I think not.  The daily RSI chart is rather compelling picture of a breakout from the former declining channel.  I’d be comfortable being long here, but would watch that channel (price and RSI) like a hawk — just like SPX.

And, the closer we get to 582-590, the closer I’d watch it.  At the present time, the 590 level looks like the most likely top (with a pause at the .618 of 569).  Any higher price movement would mean a significant breakout.